Georgetown was among more than 1000 nonprofit organizations that suffered significant asset losses due to unauthorized uses of funds, according to a Washington Post investigation published last week.
The Post’s report, which looked at tax forms from 2008 to 2012, has now prompted multiple federal investigations into whether these nonprofit organizations properly reported diversions, which are unauthorized uses of funds such as theft or embezzlement, totaling hundreds of millions of dollars.
The Post specifically examined if nonprofits checked “yes” or “no” to having a significant diversion of assets on their tax forms. A diversion is considered significant if it exceeds $250,000 or 5 percent of the organization’s receipts or assets.
According to Georgetown’s 2011 federal financial disclosure form 990 for tax-exempt organizations, obtained by The Washington Post, an unspecified university administrator improperly “compensated herself approximately $390,000” from 2007 to 2010 for work relating to a university-sponsored conference. The compensation was done through an unknown bank account over which the administrator had signature authority.
The documents state that Georgetown immediately closed the bank account upon learning of its existence and transferred the balance to a university controlled and audited account. The university then entered into an agreement with the administrator, who repaid all the unapproved compensation, plus interest.
Director of Media Relations Rachel Pugh said she could not disclose details due to confidential personnel issues.
“This investigation uncovered the additional compensation received by the administrator for work relating to the conference, so we followed internal procedures for disciplining the parties involved,” Pugh said.
Pugh would not disclose what those internal procedures were or if the administrator is still employed by the university. She said that Georgetown would expect to be contacted about a federal investigation, adding that the university has followed all proper procedures.
“The university investigated the situation and reported it through its normal governance procedures and made the appropriate disclosures on its IRS form 990,” Pugh said.
This most recent incident follows two previous cases of fraud at Georgetown.
Federal prosecutors accused Pedro Paulo dos Santos, who held various positions at Georgetown from 1998 to 2005, of falsifying documents, diverting funds and inventing a fictitious company in order to obtain more than 100 fraudulent checks totaling about $311,000 from October 2001 to January 2005. Santos served as associate director and program coordinator of the university’s Brazilian Studies Program from 2002 until his termination.
According to court records, dos Santos admitted to the theft when confronted by university auditors but fled to Brazil the following day, where he remains at large.
Additionally, former Georgetown University Medical Center administrator Adriana Santamaria was sentenced to 20 months in federal prison for stealing more than $350,000 from Georgetown from 1995 to 2002. Because Santamaria had stolen federal grant funds, which include overhead costs not associated with any individual program, Georgetown was forced to repay over $500,000 to the federal government.
Although university officials stated then that they had implemented new safeguards to prevent this type of theft after they discovered Santamaria’s embezzlement in 2003, court documents show that dos Santos used similar methods to funnel money out of university accounts for almost two years.
“In light of the dos Santos case, over the past two years, Georgetown has also taken steps to increase oversight procedures, in particular by establishing new policies requiring review and reconciliation by financial managers,” university spokeswoman Julie Bataille told The Hoya in 2007. “On the main campus specifically, there has been an increased enforcement of existing policies and procedures [and] the development of additional controls and procedures.”
In the most recent case, however. the administrator’s theft went unnoticed for approximately three years.
“Certainly any large institution faces an ongoing challenge to ensure that all of its activities are conducted in a manner consistent with policies and procedures, and we are making every effort we can to improve our system, and training and awareness,” Pugh said. “It’s an ongoing challenge at a large institution.”
The unapproved compensation accounted for less than 0.04 percent of Georgetown’s annual operating revenue, according to Pugh.
“This is distinguishable from those two [previous] cases of fraud or embezzlement because there’s no evidence that the employee had intent to defraud anyone. The individual did not submit any false documentation and fully cooperated with the investigation and is voluntarily paying restitution,” Pugh said.
She emphasized the university’s efforts to prevent such situations in the future.
“Over a few years, we have adopted more rigorous policies and internal controls,” she said, citing a more robust compliance program and an internal audit function. “We’ve really made some efforts to make the policies clearer and to make sure all employees are educated about them and their responsibilities under the policies.”
The Post also reported that Columbia University was defrauded about $5 million during a two-month period in 2010, when its medical center accounts-payable system was reprogrammed to the bank account of computer-specialist George Castro, who was not a university employee. Columbia notified the authorities, cooperated with the criminal investigation and recovered almost all the money.
In the Post’s investigation, the largest case of financial diversion occurred at Yeshiva University, a private university in New York, which lost $106 million in a Ponzi scheme linked to Bernie Madoff.